Ciena Sees 'Early Signs Of A Recovery,' 3 Analysts Dive Into Q2 Results

Zinger Key Points
  • Ciena reported F2Q revenue and EPS of $910.8M and 27 cents, beating consensus of $896M and 15 cents, one analyst said.
  • Webscale’s direct sales declined by 42% q/q, while telco sales contracted by 25% y/y, another analyst added.

Shares of Ciena Corp CIEN declined by 4.82% to $46.21 at last check on Friday, even after the company reported upbeat results for its fiscal second quarter.

The slump comes as analysts provide key takeaways on the company’s latest earnings:

  • B Riley analyst Dave Kang maintained a Buy rating, while reducing the price target from $68 to $66.
  • Needham analyst Ryan Koontz reiterated a Buy rating, while cutting the price target from $65 to $60.
  • JPMorgan analyst Samik Chatterjee reaffirmed an Overweight rating and price target of $60.

Check out other analyst stock ratings.

B Riley Securities: Ciena reported quarterly revenues and earnings of $910.8 million and 27 cents per share, ahead of the consensus of $896 million and 15 cents per share, respectively, Kang said in a note. The inventory correction cycle seems to be "nearing its end," with backlog declining by $300 million sequentially to $1.9 billion, he added.

Management guided to full-year revenue of about $4 billion, "which is at the low end of the previous outlook of -9% to -2%," the analyst wrote. Although the outlook is below consensus, the company is seeing "early signs of a recovery," he further wrote.

Needham: While reported a revenue and earnings for the fiscal second quarter, Ciena lowered its fiscal third-quarter and full-year guidance, "as customer inventory consumption and macro weighed on its outlook," Koontz said.

"Webscale direct sales cooled (-42% q/q) after 2 hot Qs and telco sales declined (-25% y/y)," the analyst wrote. The market would remain challenging for Ciena in the near term, "at least until its WL6 product cycle commences and the company demonstrates success in pluggables with the 800ZR cycle," he further stated.

JPMorgan: "Ciena continued the trend of meeting/beating already lowered expectations for revenues in the quarter and guiding down the next quarter," Chatterjee said. Although the company lowered its fiscal third-quarter guidance, it indicated "enough green shoots in activity and orders" to still exit the year with more than $1.1 billion in quarterly revenue, he added.

"Admittedly the interpretation of the guide is mixed, as the implied F4Q guide for a 20%+ q/q growth in revenue is contingent on a +50% q/q growth in orders into F3Q which is steep and unprecedented, but exiting the year at above $1.1 bn of quarterly revenue (or 4.4 bn annualized) could also imply upside to the 6%-8% revenue growth framework for FY25 shared by the company on the last earnings call," the analyst further wrote.

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